Anyone noticed the market has changed?

[yaxe]

We are in the process of buying (have sold) & it was mad in March, lots of overbidding etc. I've noticed now reductions & stuff is staying on rather than going in a wk. It's making me a bit nervous tbh.

Interest rates likely to fall in 2024

www.ft.com/content/67a6d0d9-e302-4f9b-8d67-c59243a601f9

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www.ft.com/content/67a6d0d9-e302-4f9b-8d67-c59243a601f9

UK interest rates already higher than needed, says BoE policymaker

Silvana Tenreyro says policy in restrictive territory, but counterpart Jonathan Haskel disagrees

Silvana Tenreyro says it is too early to see the full effects of ‘the fastest tightening in policy in the MPC’s history’

UK interest rates are already higher than they need to be to bring inflation back to its target level, a Bank of England policymaker argued on Friday.

Silvana Tenreyro, an external member of the BoE’s Monetary Policy Committee, told a conference in London that “policy was already in restrictive territory” before the November MPC meeting, when the majority of members voted to raise interest rates by 0.75 percentage points to 3 per cent.

She said it was too early to see the full effects of “the fastest tightening in policy in the MPC’s history”, arguing that interest rate rises fed through to the economy more slowly than in the past, as fixed-rate mortgages were more common and most homeowners had yet to refinance.

Even if interest rates remained at their current level, the economy was likely to fall into recession and inflation to fall below target in the medium term, leading the BoE to cut interest rates from 2024, she suggested.

If interest rates rose in line with recent market expectations, the UK would face a prolonged recession accompanied by a sharp rise in unemployment and further falls in living standards.

UK GDP shrank in the third quarter, according to official data released on Friday that suggested the economy had already entered recession and was now smaller than immediately prior to the Covid pandemic.

Other MPC members have already made clear that the central bank does not think interest rates will need to rise as high as the 5.25 per cent peak market pricing implied in the run-up to the last policy meeting.

But Tenreyro, who has been one of the most dovish voices on the MPC in recent months, is an outlier in suggesting that the central bank has already done enough to rein in inflation, which stood at 10.1 per cent in September — five times the BoE’s 2 per cent target.

Jonathan Haskel, another MPC external member, struck a very different note in a speech published on Friday, which he was due to deliver at the Bank of Israel on Sunday. Haskel said the latest signs of the economy slowing did not imply there was less need for the BoE to tighten policy.

High inflation could be especially sticky in the UK, he argued, because the country had a very tight labour market — partly as a result of ill-health keeping people out of the workforce — and a very poor record on investment.

“My concern is that these supply-side stresses risk persistent inflationary pressure . . . right now, I believe it important for monetary policy to stand firm,” Haskel said.

But some observers are increasingly worried that central banks — having been too slow to raise interest rates in the recovery from the Covid pandemic — could now make the opposite mistake, with their collective efforts to curb inflation causing a sharper global downturn than necessary.

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Tenreyro dissented from the majority of MPC members at the last meeting, voting for a rate increase of just 0.25 percentage points. The only reason she backed even this increase, she told the Society of Professional Economists, was to guard against the risk of so-called “second round effects” setting in and turning high inflation into a self-fulfilling phenomenon.

This could happen if people saw high inflation as normal, with workers demanding bigger wage rises to offset it and companies trying to preserve profit margins.

But, she said, there were now signs of the labour market loosening, with employers telling BoE agents that they had paused recruitment, and fiscal policy also looked likely to be “tighter than I previously assumed”.

Copyright The Financial Times Limited 2022. All rights reserved.

They are forgetting BOE has to follow the fed to keep sterling worth something. Not increasing rates devalues our currency which makes imports more expensive.

They have already baked in another .5% and are going for the short, sharp shock approach in the budget.
Whether that is seen in mortgage rate rises is open to question, but affordability has dropped by well over 30%.
Lower house prices are better for everyone, apart from downsizers, but they have so much equity anyway, it doesn’t matter much.

@C4tastrophe falling houses prices isn’t good for people who have recently bought their first house after saving for years

It is. If they move, usually it’s upwards, and those houses are falling by a higher monetary value. EG, ftb has house bought for 200k, but has dropped by 30%, so now worth 140k.
Bigger house they want to buy was 500k, but has also dropped by 30%, so is now 350k. The ftb’s delta would have been 300k, now it’s 210k.

It’s a decent argument but the problem is trying to find a new fixed rate mortgage while in negative equity. The lenders will look at this very carefully.

@C4tastrophe they can’t move if they lose all their equity

@nw22 the banks usually come up with something as they make good money on mortgages. But there are always winners and losers in a recession and yes some people who bought at peak prices with minimum deposit will be stuck, but lower house prices are better for the wider economy.

My neighbour sold her house for £300k in May but the chain collapsed last week, on the day of exchange. Apart from all the legal and removal fees she'll have to pay, her estate agent has told her to remarket at £270k. She hadn't had any interest whatsoever in the past week. So houses may not be showing as reduced, but are being priced more realistically it seems.

Rates might fall in 2024 but we are in 2022 still and it's far too early to say.

This particular MPC committee member seems to be the most dovish so not sure she is very representative of the wider opinions on the MPC. At present, rates are expected to go higher. The Fed has not shown signs of an intended pivot although a 0.5% raise seems to be generally expected in December. It doesn't necessarily follow that a smaller percentage rise means they have stopped raising though. We also have QT starting which is likely to cause all sorts of problems in the markets.
Even if mortgage rates don't go much higher than they are at present, current rates represent a huge % increase and are already causing price decreases and have been for a few months. This will only increase as the effects of recession becomes more apparent and taxes rises even higher.

I think @C4tastrophe makes fair points about lower (let's say affordable) house prices being better overall. Unfortunately, that horse bolted long again so falling prices, especially rapidly falling prices, will cause much pain and have lots of repercussions now.

But those people might be on a 5 year fixed, so could be fine in 5 years. Probably more of a problem if on a 2 year.

Even in two years it will be absolutely fine, the worst comes to the worst and you go on standard variable for a couple of years and it’s a bit tight. All the banks and the building societies will literally do everything in their power to keep you in your home the only people that get repossessed of the ones who bury their heads in the sand and don’t engage in communication or the ones who sadly both lose their jobs and benefits aren’t enough to cover the mortgage but I have a strong feeling that predicament will be covered in the next budget in terms of government support.

if everyone tries to put aside at least nine months mortgage payments and not prevent you from even damaging your credit record until the benefits kick in if nothing changes at all.

Which in theory is a great idea, but you can’t have more than £6000 savings on UC without your payments being reduced. It was fine to have saving with WTC, but anyone made to move over to UC, would not be able to have much in the way of savings even if they are working.

I can’t imagine anybody who is entitled to universal credit being in a situation where they would be able to save £250 a month nor have a mortgage in excess of £1000 a month can you ?
Basic maths, £6000 divided by 9, £666 per month. Lets say the mortgage is 1/3 of their outgoings which would suggest a net income of £24,000. Nearly £30,000 a year. UC savings isnt going to be a factor for many to have to worry about.

And even if that was the situation six grand is a cushion is better than nothing.

'absolutely fine' is a bit over optimistic.
I expect, as you say, that the government will put pressure on lenders.

They will both apply pressure to the lenders and they will bail out the homeowners if required because the alternative is unthinkable.

Maybe. It kind of proves my point that your 'absolutely fine' is a bit over optimistic!!

They can`t bail anyone out because the mini-budget showed us what the bond markets will do when they try, the alternative is cheaper property which as other posters have said is a great thing for the UK.

Looks like the UK property bubble has finally met it`s pin, took so long and in the end it happened so fast, happy days for most sensible people really?

No the markets reacted to many components not “bailing out” anyone, they didnt react at all to the cost of living payments or the entire country having their winter bills paid for them. A handful of people requiring mortgage support wont be of any consequence - although why im replying to a bot i dont know.

FWIW I don't think the government will be offering mortgage support or bailing out people who are struggling with high interest rates. I think they've indicated pretty clearly that they can't keep bailing people out. I think they'll apply pressure to lenders to do everything they can to keep people in their home. I believe repossessions are already up 25% although from a very, very low base.

Do you have any evidence or data whatsoever that indicates repositions are up 25% ?

The policy of keeping people in their own homes has already been pencilled in by Boris in the summer so they’ve clearly anticipated potential issue this coming over the hill and are ready. Additionally there is already Mortgage support in place for people on benefits. As I say I’d love to see any evidence whatsoever of that massive increase in repossessions because I find it extremely hard to believe that wouldnt be all over the front pages by breakfast.

https://www.estateagenttoday.co.uk/breaking-news/2022/11/mortgage-repossession-claims-on-the-rise--data

This article actually says 30% but, as I said, from an extremely low base.

www.estateagenttoday.co.uk/breaking-news/2022/11/mortgage-repossession-claims-on-the-rise--data

Are you calling me a moron for linking to an article?